550 Bailey Avenue
Fort Worth, Texas 76107-2155
Telephone: (817) 347-8200
Fax: (817) 332-7066
Web site: http://www.bombaycompany.com
Incorporated: 1987 as Bombay Company
Sales: $575.3 million (2004)
Stock Exchanges: New York
Ticker Symbol: BBA
NAIC: 442110 Furniture Stores; 454110 Electronic Shopping and Mail-Order Houses
The Bombay Company, Inc. is a retailer of large furniture, small, occasional furniture, home accessories, and wall decor. The firm operates more than 500 stores across North America, most of which are flagship Bombay units with a few dozen each of the BombayKIDS and Bombay Outlet formats. Traditionally a mall-based retailer, Bombay in the early 2000s began pursuing an off-mall strategy, and by the end of 2004 more than one-quarter of the units were in off-mall locations. Another key strategy for the company is to offer a unique product line: More than 95 percent of the products it sells have been designed or styled specifically for Bombay. The company made its initial mark selling traditional, dark-stained English-style wooden furniture but has since broadened its lines to include other styles. In addition to running its core stores, Bombay also sells products through catalogs and on the Internet and operates a small wholesaler, Bailey Street Trading Company, which distributes furniture to other retailers.
The Bombay Company got its start in 1975 as a mail-order business based in New Orleans. The company sold mahogany-stained reproductions of small 18th- and 19th-century English furniture pieces, such as plant stands, nightstands, and butler's tables, which were manufactured in the Far East. After running advertisements in upscale magazines such as the New Yorker, Bombay Company shipped its goods to customers in flat boxes, for assembly. Usually, all the customer had to do was screw the legs on. Entrepreneur Brad Harper, who founded the company with a partner, named the enterprise "Bombay Company" in an effort to conjure up the glory of the British Empire at its height. Most people, however, missed the reference.
By the end of the 1970s, Bombay Company was racking up annual sales of about $1.5 million, offering 12 different items of accent furniture through ads in magazines. Overall, however, the company was losing money. The quality of the products it sold was uneven, as its distant Asian manufacturers proved unreliable. Also, The Bombay Company's growth was severely limited by its reliance on mail order.
In 1979 Bombay signed an agreement with Canadian entrepreneur Robert E.M. Nourse to begin selling its products in Canada. For rights to the Canadian market, Nourse paid one dollar, plus a 4 percent royalty on sales. Since Canadian mail-order opportunities were extremely limited, Nourse set out to convert The Bombay Company into a successful retail property.
In April 1980 Nourse's first Bombay Company store opened in Toronto's Eaton Centre mall. Nourse had concluded that The Bombay Company was able to offer customers three things that made location in a mall advantageous: value, fashion, and instant accessibility. Value was provided by the fact that the company's products, manufactured in Taiwan and other East Asian countries, were not high-priced.
Fashion, the hook to lure customers out of the mall and into The Bombay Company store, was provided by an elaborate store design. Under the watchful eye of a designer, the company's 2,000-square-foot space was transformed into a replica of England's Fountain Court, located at Henry VIII's palace, Hampton Court. In order to pay for this renovation, and other start-up expenses, Nourse invested $125,000 of his own money, and borrowed an equal amount from a bank.
To justify this expense, and the high rent of a mall space, Bombay needed to attract impulse buyers. Since Bombay Company products came boxed flat, a large number of them could be kept in stock without taking up an excess amount of space for storage. Because of this, customers could take home their purchases right after deciding to buy them. In this way, The Bombay Company introduced an element of immediate gratification to the furniture market, in contrast to a traditional furniture store, where customers ordered items, and then waited six to 12 weeks for delivery. In The Bombay Company store, 35 styles of furniture were available to be carried out of the store at the time of purchase. With these elements of a successful retail operation in place, The Bombay Company store in the Eaton Centre mall was an immediate success.
Three months after the opening of the Toronto Bombay Company store, in July 1980, Harper sold 80 percent of the U.S. operations of The Bombay Company to a Fort Worth-based holding company called Tandy Brands, Inc., for $26,000 plus assumption of the company's debts. The Bombay Company's new corporate parent was a miniconglomerate, spun off from the Tandy Corporation in 1975. In July 1981 Tandy Brands acquired the remaining 20 percent of The Bombay Company.
After a year of successful operation of the Eaton Centre Bombay Company outlet, Nourse was looking for additional financing to buy further inventory and expand his store. Since the general financial climate for borrowing money at that time was highly forbidding, he felt that he had no choice but to sell out to Tandy. In August 1981, Tandy also bought out Nourse's Canadian operation. "I had mixed feelings about [Tandy] buying me out," Nourse later told Inc. magazine. "If capital had been available at a reasonable cost, I never would have sold. But at the time it was the only way to grow the company."
Under the terms of the sale, Nourse retained control of the Canadian operations of The Bombay Company. With the influx of money from Tandy, he was able to build 13 stores by 1983, all of which proved profitable.
South of the Canadian border, however, the situation looked very different. Tandy had built 36 Bombay Company stores since taking over the company, and the business was hemorrhaging money, having racked up $3 million in losses in just three years. By the end of 1983, the situation had become desperate. In an effort to revive its American operation, Tandy's chief executive officer moved to merge the company's successful Canadian operations into its money-losing American operations, and put Nourse in charge of both.
Nourse took control of the consolidated Bombay Company operations at the start of 1984. His strategy for renovating the company's ailing American operations was to implement the profitable store model that he had developed in Canada in The Bombay Company's American locations. To do so, however, it was necessary to close a number of unprofitable American stores in weak locations. Within three months of Nourse's arrival, nine of the company's 36 stores had been shut down. "We saw our concept as selling home decor in malls and other high-traffic locations," Nourse later told HFD—The Weekly Home Furnishings Magazine, an industry journal. "A number of the stores were in bad locations; that first year we closed more stores than we opened."
In addition to pruning unprofitable stores, The Bombay Company revamped its product line, under the direction of Nourse's wife, Alexandra "Aagje" Nourse, an advertising executive who had taken responsibility for the company's design operations. Under her direction, the company shifted away from masculine, military style furniture, which looked like it might have been used in a British military campaign of the previous century, toward more feminine and traditional Chippendale, Hepplewhite, and Queen Anne styles. In addition, the company began to market more home accessories, such as mirrors and lamps, and also started to offer printed fabrics for decorating. To keep customers interested, a constant flow of new products was moved through the store, and seven different catalogs a year alerted customers to the presence of new items.
In 1984 The Bombay Company began to open additional stores, relying on the other subsidiaries of Tandy Brands for financing. At the end of the fiscal year, the company posted a loss of $3 million, but by the middle of 1985, The Bombay Company was back in the black, turning a profit of $500,000. With these gains, The Bombay Company began to step up its plans for expansion. Its first targets for growth were areas of the United States where traditional furniture was best accepted: the mid-Atlantic states, the Southeast, the Midwest, and the Pacific Northwest. By 1986, the company was operating stores in 75 different locations, and earnings had hit $2 million. In 1987 the number of Bombay Company stores reached 114.
In 1988 and 1989 The Bombay Company moved its expansion into the Sunbelt for the first time, opening stores in Los Angeles and southern Florida, with exterior architecture carefully calibrated to blend with other surrounding structures. "We have to be careful," Robert Nourse told HFD in 1989. "We always wondered about the Sunbelt. But our Southern California stores and our store in Palm Beach are going gangbusters."
By April 1989, The Bombay Company had opened 190 mall stores, and the company's revenues had reached $79 million, up from $55 million the year before. The company had introduced a line of products with neoclassical styling, to complement its other Georgian and Victorian offerings. In September 1989 Bombay opened a flagship East Coast store on Madison Avenue in Manhattan, which soon began turning in record sales.
Bombay is dedicated to providing our customers with unique products that inspire them to add their personal touch when decorating their home. With over 90 percent of our merchandise designed and produced exclusively, our distinctive products are what keep our customer looking to us for uncommon finds at exceptional values.
While The Bombay Company was steadily growing, its corporate parent, Tandy Brands, was gradually streamlining its operations, shedding other properties and companies that were smaller and less profitable than The Bombay Company. In 1984 it closed two chains of retail stores, Western World and Ryon's, and two years later, Tandy sold its Tex Tan Western Leather division for about $3 million. In March 1987 the company sold its Grate Home and Fireplace Company for $1.6 million. By the end of the decade, it had effectively centered its operations on The Bombay Company. Accordingly, on November 9, 1990, the company changed its name to The Bombay Company, Inc., and two months later, it completed the final transfer of its other accessories operations to its shareholders.
In the midst of this consolidation and concentration on the home furnishings market, The Bombay Company also moved to expand its franchise in this area. In the fall of 1990, the company opened three new concept test stores in Southern California. Called Alex & Ivy (named after Aagje Nourse's two cats), these outlets offered the same type of merchandise as Bombay Company stores, but with a more relaxed, country theme. Robert Nourse characterized Alex & Ivy merchandise in a 1990 HFD article as "more casual, yet traditional stylings. They will include European country, Italian Renaissance, French country and some traditional Swedish country … lots of painted finishes … a little more whimsical than Bombay."
The stores were opened in areas where The Bombay Company did not already have retail outlets. A second test of another three stores was planned for locations right next door to Bombay Company stores, to measure how much their success would come at the expense of their older retail sibling. Both store chains were planned to take advantage of the same structure for manufacturing and distribution, and to appeal to the same demographic group of customers: well-educated women, with higher than average incomes.
"We constantly had comments from Bombay customers who said, 'I love your stores, but it isn't exactly our kind of furnishings,'" Aagje Nourse told HFD in 1994. "We … had hopes we could do something that was the other side of Bombay's lifestyle." Each Alex & Ivy store was slated to look exactly like all the others, arranged according to elaborate plans from the company headquarters, and the merchandise mix was set at half furniture, half accessories, such as quilts, pillows, lamps, and wall art.
Despite the recession of the early 1990s, which flattened The Bombay Company's earnings somewhat, the company continued to post strong growth in sales. By mid-1990, sales had reached $112 million, and earnings were at $12.3 million. By the middle of 1991, 43 more stores had been opened, nudging revenues up by a quarter to $140 million, but earnings had remained flat.
By the start of 1992, The Bombay Company's steady stream of new products had started to produce stores that were cramped with merchandise. In an effort to alleviate this problem, and to shake up the company's entrenched retail formula, the company opened a superstore in lower Manhattan as an experiment. The new store had about 3,500 square feet of space, instead of the usual 1,700. When this concept showed promise, The Bombay Company converted two more stores to the new, larger format.
In February 1993 The Bombay Company decided to convert almost all of its retail outlets to superstores. "I believe a business, and certainly a retail business that changes so quickly, has to keep reinventing itself or it will whither and die," Robert Nourse told Inc., in explaining the chain's decision to leave its original store concept behind.
By the end of 1993, The Bombay Company had opened 100 superstores, and plans were on the board to add 50 more each year. In November of that year, the company marked the opening of its 400th store. In its Alex & Ivy operation, The Bombay Company had opened 26 stores, in California, Texas, Connecticut, Delaware, Georgia, Maryland, New Hampshire, New York, and New Jersey. Revenues from these combined operations reached $232 million, and earnings were at $16 million.
This pattern of strong growth continued in 1994, after The Bombay Company reported a strong holiday sales season at the end of the previous year. With these results, the company decided to expand its program to double the size of its stores in its fledgling Alex & Ivy chain as well. Tests of the "international country" concept had demonstrated that it appealed to a different set of customers within the company's basic demographic target, and that sales lost in The Bombay Company stores to Alex & Ivy outlets equaled only 5 percent of business.
In January 1994 the company began to install a new merchandising computer system, to speed up customer transactions and upgrade inventory controls. In addition, the company laid plans to open a fourth distribution center in Atlanta to provide goods to its newly enlarged stores. This facility joined three other distribution sites located in Texas, Pennsylvania, and Canada.
Sales began stagnating in the spring of 1994, at the same time that profits were being hurt by higher operating costs, partly stemming from higher inventory levels. Wall Street began pummeling the stock because of the disappointing results, and Bombay's shares fell by more than 70 percent by early 1995. One problem was that the company had expanded its larger format stores too quickly—and without enlarging the product line to fill up the larger space. The poor results, coupled with clashes with Robert Nourse, led to the ouster of executive vice-president Michael L. Glazer in January 1995. Glazer had been in charge of day-to-day operations since early 1991. Another problem area was the Alex & Ivy chain. It too had been expanded too rapidly, reaching 62 units by January 1995. By that time, it was losing about $2 million per year. Glazer had had a plan to quickly get Alex & Ivy to break even, but Nourse abruptly shut down the chain in January 1995, incurring a $30 million charge that resulted in a net loss of $14.7 million for 1994.
Bombay's struggles continued. Numerous managers left the company in 1995 following Glazer's departure, including two of four regional managers, both the vice-president and the director of store operations, the chief merchandising officer, and one-third of the 36 district managers. When Nourse had failed to turn Bombay around by September 1996, the board of directors ousted both him and his wife. The board chairman, Carson R. Thompson, who was Bombay's CEO from 1982 to 1991, was named president and CEO on a temporary basis.
Under Thompson, Bombay slashed inventory and changed its merchandise mix. Believing that the product lines had become too upscale, the firm eliminated some of its more expensive items in favor of moderately priced pieces and also returned to a tighter focus on the traditional dark-wood styles that were the chain's trademark. More accessories were also added to the mix, along with a collection of upholstered chairs and sofas. Furthermore, a new store design was introduced, one that, according to the industry journal HFN, resembled "a turn-of-the-century mercantile building." The breakneck growth of the past was halted, as only a handful of new stores were opened in 1997.
Thompson left the company in March 1997. Taking over on an interim basis was Robert S. Jackson, a board director. Finally in February 1998 Carmie Mehrlander was brought onboard as president and chief operating officer. She was a veteran retail manager, with stints at Sears, Roebuck and Co.; Home Shopping Network, Inc.; Abraham & Straus; and R.H. Macy & Co., Inc. Over the next two years the leadership gradually transitioned to Mehrlander, who was named CEO as well in February 2000.
Under the new leadership, Bombay continued to evolve in the late 1990s and into the new century. In 1998 the company moved into the outlet mall market, opening the first Bombay Outlets, which offered both clearance items from the flagship stores and merchandise that had been specifically developed for outlet customers. At the Bombay stores, a key new marketing strategy was to develop and offer to customers entire collections of furniture and accessories, rather than simply selling individual, unrelated items. These collections focused on four rooms of the home: living room, dining room, bedroom, and home office. After largely following a mall-based strategy for most of its existence, The Bombay Company also began testing off-mall locations. The idea was to lower operating costs while improving profitability based on consumers' increasing preference for non-mall shopping venues. By 2000 Bombay had committed to gradually shift toward off-mall sites: when leases for its mall stores expired, some of them would be closed and replaced by nearby off-mall stores. Furthermore, many of the new stores to be opened would likewise be in off-mall locations. By early 2002 nearly 10 percent of Bombay stores were located outside an enclosed shopping mall.
Other efforts in the early 2000s focused on pursuing further channels for growth. In March 2000 the company formed Bailey Street Trading Company, a wholesale subsidiary charged with selling Bombay products to other retailers and the contract trade. Late in 2001 Bombay introduced a children's furniture and home accessories line that was available via a mail-order catalog and an Internet web site. This was followed by the opening of the first BombayKIDS store, in Dallas in March 2002. Several more BombayKIDS opened in the fall, and the new format proved a huge success as the launch was well-timed, coming in the midst of a booming market for children's home furnishings. The first BombayKIDS store, like many of the subsequent ones, was opened adjacent to a regular Bombay store. The two stores, which occupied 9,000 square feet of space, had separate entrances but also sported a connecting passageway inside. By the end of 2003 there were 35 BombayKIDS stores located across North America.
Unfortunately, the management team's focus on these new—and still very small—initiatives distracted them from the core Bombay outlets. The product lines there were allowed to become stale and dated. Worse, the company missed the entire post-9/11 home-focused craze that became known as nesting or cocooning. The managers canceled merchandise orders and marketing campaigns, believing that American consumers were unlikely to be interested in purchasing such things as candlestick holders and four-poster beds in the new environment. The fall person for these questionable decisions was Mehrlander, who resigned under pressure in August 2002.
While the CEO position remained vacant, James D. Carreker was named nonexecutive chairman in December 2002. He then became CEO as well in June 2003. Carreker was a former CEO and chairman of hotelier Wyndham International, Inc., and he had experience at several retailers, including Federated Department Stores, Inc.; Burdines, Inc.; and Sanger-Harris, Inc. The new executive led Bombay through a turnaround year in 2003. As it sold off accumulated inventory through heavy markdowns, Bombay refreshed its merchandise selection and introduced a new, three-tier pricing scheme. The company enjoyed its best results in a decade: Net income jumped 37.9 percent to nearly $10 million, while revenues increased 20.7 percent, reaching $596.4 million. Same-store sales (that is, sales at stores open at least 12 months) surged 13 percent. Revenues from the company's nonstore business, which encompassed e-commerce, catalog, and wholesale, grew 8 percent. Late in the year, Bombay reached an agreement with e-commerce leader Amazon.com, Inc. to sell Bombay, BombayKIDS, and Bombay Outlet products through Amazon's home and garden store. During the year, an increasingly confident Bombay Company boosted its store count by 49, the largest amount of store openings in a decade.
Bombay strengthened its alliance with Amazon in May 2004 when it reached an agreement to hand over complete management of its e-commerce operations to Amazon. Although its store count surpassed the 500-unit mark for the first time during 2004, Bombay slowed its store openings midyear because of disappointing sales. The company divested its Bailey Street Trading wholesale operation late in the year in order to reallocate resources to its core retail businesses. Despite such moves, The Bombay Company failed to capitalize on the momentum established in 2003. Overall revenue fell 4 percent during 2004, while same-store sales plummeted 12 percent. In the highly competitive retail environment—particularly in the middle of the market, where Bombay operated—it was difficult to determine whether these results were a momentary blip on a longer-term turnaround or the beginning of a new period of struggle.
The Bombay Furniture Company of Canada; BBA Holdings, Inc.; The Bombay Furniture Company, Inc.; BMAJ, Inc.; The Bombay Company de Mexico, S.A. de C.V.; Bombay International Inc.; Bailey Street Trading Company.
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—update: David E. Salamie